Home Price Growth Recorded in Virtually All U.S. Metro Areas Last Year

On a nominal basis, U.S. home prices surpassed their previous peaks in 2016, but adjusted for inflation, they are still 15 percent shy of the high.

In the Bay Area, home prices in the San Francisco and San Jose metro areas have exceeded their former peaks, while prices in five other local regions are still short of previous highs.

San Jose ranks as the nation’s least-affordable housing market, with less than 25 percent of households able to purchase a home.

Record-low inventory levels pushed appreciation higher across the country in 2016, though home prices in most parts of the country and the Bay Area are still well short of their previous peaks.

The State Of The Nation’s Housing 2017 report, published by the Harvard Joint Center For Housing Studies, says that home prices increased in 97 of 100 U.S. metro areas in 2016. Nationwide, home prices grew by 5.6 percent from the previous year on a nominal basis, exceeding the high set about a decade ago. But adjusted for inflation, prices are still 15 percent short of the previous peak, meaning that the average U.S. homeowner has yet to fully regain the housing wealth lost during the Great Recession.

Nationwide, real home prices rose 32.1 percent between 2000 and 2016. Home price growth exceeded 40 percent in 153 U.S. metro areas during that time period, including most of the Bay Area. Figure 1 summarizes home price changes since 2000 and from peak levels (2005-2006) in local metro areas.

Figure 1: Home price changes since 2000 and from peak levels in local metro areas.

Source: Harvard Joint Center For Housing Studies

“While the recovery in home prices reflects a welcome pickup in demand, it is also being driven by very tight supply,” Chris Herbert, the Center’s managing director said. “Even after seven straight years of construction growth, the US added less new housing over the last decade than in any other ten-year period going back to at least the 1970s.”

There were 1.65 million homes for sale in December 2016, down 6.25 percent year over year and a record low. The U.S. had a 3.6-month supply of homes for sale in 2016, the lowest in 11 years.

Nationwide, 59 percent of Americans can afford the median-priced single-family home. Here in the Bay Area, that number is of course far lower given the region’s sky-high housing prices. In San Jose, just 22.3 percent of all households and 12.1 percent of renters could afford the median-priced home, the lowest of the 100 metro areas included in the report. In San Francisco, 25.2 percent of households and 13.6 percent of renters can afford to purchase a home.